Citizens & Southern National Bank v. Haskins

Arthur Haskins created a trust that provided for equal income payments to his five children for life, income payments to the descendants of any deceased child per stirpes, and distribution of principal to any lineal descendant at the death of the last surviving child or grandchild living at the time of Arthur’s death. Arthur appointed three of his sons as cotrustees and Citizens and Southern National Bank (defendant) as corporate cotrustee. The trust provided that the cotrustees had discretion to apportion expenses and receipts between trust income and principal and allocate trust income and principal as they reasonably deemed fair and equitable under the circumstances. The bank invested in a corporation in which it had an ownership interest. For several years, the bank made no income payments, allocating approximately $550,000 to trust principal. Also, for several years, the bank was paid no fees for its administration of the trust. Three of the children, two of whom were cotrustees (plaintiffs) and all of whom were income beneficiaries, sued to compel distribution of trust income and removal of the bank as cotrustee for mismanagement of the trust assets. The bank countersued for the unpaid fees. The trial court ordered an immediate allocation of $250,000 to the income beneficiaries and no further allocation until two years following the death of Arthur’s last surviving child. The court did not remove the bank as trustee and ordered payment of the bank’s fees from the trust principal. Both the income beneficiaries and the bank appealed.